Cost Optimization of Cloud Computing Services in a Networked Environment

Cloud computing service providers' offer their customers' services maximizing their revenues, whereas customers wish to minimize their costs. In this paper we shall concentrate on consumers' point of view. Cloud computing services are composed of services organized according to a hierarchy of software application services, beneath them platform services which also use infrastructure services. Providers currently offer software services as bundles consisting of services which include the software, platform and infrastructure services. Providers also offer platform services bundled with infrastructure services. Bundling services prevent customers from splitting their service purchases between a provider of software and a different provider of the underlying platform or infrastructure. This bundling policy is likely to change in the long run since it contradicts economic competition theory, causing an unfair pricing model and locking-in consumers to specific service providers. In this paper we assume the existence of a free competitive market, in which consumers are free to switch their services among providers. We assume that free market competition will enforce vendors to adopt open standards, improve the quality of their services and suggest a large variety of cloud services in all layers. Our model is aimed at the potential customer who wishes to find the optimal combination of service providers which minimizes his costs. We propose three possible strategies for implementation of the model in organizations. We formulate the mathematical model and illustrate its advantages compared to existing pricing practices used by cloud computing consumers. Keywords—Cloud Computing; Pricing Model; Cost optimization; Software as a service; Platform as a service; Infrastructure as a service